FM Cost Trends

Outlook for Energy and Water Costs in 2014

Electricity Rates Projected to Increase
1.5% in 2014

The rising cost of generation fuels, particularly natural gas, contributes to a projected increase in the price of electricity for 2014. For commercial customers, average prices are forecasted to increase by 1.5%. Consumption of electricity in the commercial sector grew by an estimated 0.7% in 2013.

2014 Spot Prices for Natural Gas Forecasted
to Rise 2.4%

EIA forecasts that the Henry Hub natural gas spot price, which averaged $2.75 per million Btu units (MMBtu) in 2012, will average $3.69 per MMBtu in 2013 and $3.78 per MMBtu in 2014. Natural gas working inventories ended November 2013 at an estimated 3.61 trillion cubic feet (Tcf), 0.19 Tcf below the level at the same time a year ago and 0.11 Tcf below the previous five-year average (2008-12).

Milder Heating Season Ahead?

Based on weather forecasts from the National Oceanic and Atmospheric Administration (NOAA), EIA projects that U.S. winter heating degree days in January 2014 will be approximately 5% higher than in January 2013. However, February degree days (-4.3%) and March (-14%) are projected to be fewer in 2014. That would result in a 3.7% decline in winter heating days over the three-month period compared to the same period a year ago.

Water Costs Run Twice the Rate of CPI

Water rates have increased faster than inflation, a trend that is likely to continue in 2014 and beyond, according to the American Water Works Association. Although per capita water consumption has been declining in the U.S., regulatory requirements and water utilities’ need to recover their fixed costs over less consumption will continue to put upward pressure on rates.

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